Burgess Rawson November portfolio auctions tipped to set new records

Assets housing big brand, COVID-proof tenants are expected to be the star performers at Burgess Rawson’s November portfolio auctions, with the prospect of opening up post-pandemic boosting buyer confidence.

The largest line-up to date is packed with assets deemed to be recession-proof including childcare centres, service stations, medical centres and fast food restaurants, with some more niche properties thrown into the mix.

Headlined by brands such as KFC, Coles, Woolworths, Dan Murphy’s, Liquorland, Ikea, Viva Energy and Kmart, there are 68 properties to sell at auction or via expressions of interest or private sale, with price points ranging from $550,000 to around $60 million.

National head of agency Adam Thomas said the auctions could surpass Burgess Rawson’s record-breaking September events, which saw 49 properties transact for a combined value of $189 million on a blended yield of 4.70%.

“Confidence is at an all-time high and investors continue to focus on secure, long-term investment leased by the government or an essential service tenant,” he said.

Confidence boost as Australia opens up

The three events, to be held in Sydney on 9 November, Brisbane on 10 November and Melbourne on 11 November, come as NSW and Victoria emerge from lockdown and Australia prepares to fling open borders.

International tourists are not far away, with a new wave of permanent arrivals right behind them. This context could really boost investor confidence at this auction, REA Economist Anne Flaherty said.

“Essential service assets benefit from population growth and we will start to see population growth return from 2022,” she said.

“Those investors who have been a bit wary about how long the pandemic is going to last and how tourism is going to be impacted are probably going to get some of that confidence back.”

Chief economist at Knight Frank Ben Burston said the pandemic has prompted investors to seek greater diversification and opportunities beyond Sydney and Melbourne, with confidence ramping up ahead of a brighter 2022.

“With lockdowns subsiding, confidence in the outlook is picking up and this will drive an acceleration in deal activity over the next 12 months. Investors are keen to secure assets now to take advantage of the recovery,” he said.

“The outlook is now for more even growth across the country.”

Prized assets

A Woolworths Metro in Brisbane with a seven-year lease is also up for grabs. Picture: realcommercial.com.au/for-sale

Assets expected to gain exceptional interest at the portfolio auctions include two liquor stores being sold with leasebacks from Coles, a First Choice Liquor in Sydney’s beachside suburb of Maroubra and a Liquorland in Woonona, north of Wollongong.

In Victoria, a Kmart in the regional town of Cobram offers investor-preferred net-lease terms, with Kmart paying all outgoings including land tax.

In Queensland, a Woolworths Metro store opposite Brisbane’s Central Station comes with a seven-year lease with options to 2048, while an EG Fuel service station in Kenmore, southwest of the city, provides a rare ground lease, with the tenant responsible for the building and all underground tanks.

Huge demand is also anticipated for the 12 childcare assets in the line-up, which Mr Thomas expects to sell on yields of between 4-5.5%.

Ms Flaherty said childcare assets in good locations with good quality providers and long leases with rental increases already factored in are selling at record low yield levels, mainly because investors are willing to pay top dollar for them.

Burgess Rawson’s September auction saw Affinity Childcare at Umina Beach on the NSW Central Coast achieve the lowest yield ever for a childcare asset in the state, selling for $7.5 million on a yield of 2.99%.

This time around, highlights include an Only About Children centre in Melbourne’s Pascoe Vale South; a three-storey centre in Bulleen, Victoria leased to Kids Club; a high profile Imagine Childcare centre in the NSW regional town of Dubbo that includes a 20-year lease; and a Journey Early Learning centre in Banyo, north of Brisbane, that comes with a new 15-year net lease to 2036.

Niche asset opportunities

The portfolio also includes more niche assets including the ALH Group’s Pacific Pines Tavern on the Gold Coast, which with lease options to 2074 is expected to gain one of the highest prices.

Other stellar properties include ALH pub Varsity Lakes Tavern and Dan Murphy’s freehold investment in nearby Burleigh Heads, and the iconic Fyshwick Markets in Canberra, which is anticipated to sell for around $60 million.

There are also entry points for new investors, such as a Chempro Chemist at Palm Beach, which is expected to fetch around $2 million.

Mr Thomas said The Pacific Pines pub is in a residential area that doesn’t rely on tourists and has been unaffected by lockdown, while the pub in Burleigh Heads will likely have benefited from population growth thanks to sea change migration throughout the pandemic.

Ms Flaherty agreed “an asset like a pub may be seen as less risky compared with maybe 12 months ago”.

Value perception in Queensland

The portfolio sale in Brisbane is Burgess and Rawson’s second standalone event in Queensland, made possible thanks to higher transaction volume in the state coupled with fewer COVID-related restrictions.

Joint head of agency at Burgess Rawson Andrew Havig said the Queensland action will benefit from livestreaming technology rolled out during the pandemic.

“We can have bidders in the room, on the phone or in their own home on the computer. It broadens the scope.”

Sentiment in the Sunshine State remains “really strong” thanks to a combination of growth indicators, he said.

“We’re seeing more buyers wanting to buy here, due to interstate migration and overseas migration once those borders open, and the 2032 Brisbane Olympics as well.”

But while Queensland has historically offered higher yield possibilities than NSW or Victoria, Mr Havig said yields are starting to compress there too.

“There’s always been a value perception around Queensland. There’s a lot of demand and good capital out there for these kinds of properties, which is far exceeding supply.”

Supply expected to increase

There are 12 childcare assets for sale. Picture: realcommercial.com.au/for-sale

Ms Flaherty said the number of people looking to buy commercial property is only increasing.

“On realcommericial.com.au we’re seeing incredibly high numbers of people enquiring after commercial properties and a lot are similar in nature to what we’re seeing in these portfolio auctions,” she said.

Mr Burston at Knight Frank said private investors are increasingly competing with property funds on larger scale investments.

“The low interest rate environment and increases in net wealth are leading more private investors to seek out commercial real estate investments,” he said.

But after a drop-off in property supply during the pandemic, Ms Flaherty said we can expect to see an increase in stock.

“Vendors who may have been holding off listing during the pandemic may consider listing now,” she said. “If you’re the owner of a childcare centre and you’re looking at these record low yields that have been achieved, you might think now is an excellent time to generate some value.

“Even if you own a riskier asset like a retail property, conditions of selling are currently better than what they were 12 months ago, and that should support supply.”